Correlation Between Goldman Sachs and Federated Bond

Can any of the company-specific risk be diversified away by investing in both Goldman Sachs and Federated Bond at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Goldman Sachs and Federated Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Goldman Sachs Financial and Federated Bond Fund, you can compare the effects of market volatilities on Goldman Sachs and Federated Bond and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Goldman Sachs with a short position of Federated Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goldman Sachs and Federated Bond.

Diversification Opportunities for Goldman Sachs and Federated Bond

0.0

Correlation Coefficient

Goldman Sachs  Federated Bond

Pay attention - limited upside

The 3 months correlation between Goldman and Federated is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Goldman Sachs Financial and Federated Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Bond and Goldman Sachs is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Goldman Sachs Financial are associated (or correlated) with Federated Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Bond has no effect on the direction of Goldman Sachs i.e., Goldman Sachs and Federated Bond go up and down completely randomly.

Pair Corralation between Goldman Sachs and Federated Bond

Assuming the 90 days horizon Goldman Sachs Financial is expected to generate 32.25 times more return on investment than Federated Bond. However, Goldman Sachs is 32.25 times more volatile than Federated Bond Fund. It trades about 0.02 of its potential returns per unit of risk. Federated Bond Fund is currently generating about 0.03 per unit of risk. If you would invest  409.00  in Goldman Sachs Financial on October 11, 2024 and sell it today you would lose (309.00) from holding Goldman Sachs Financial or give up 75.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Goldman Sachs Financial  vs.  Federated Bond Fund

Goldman Sachs Financial

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Goldman Sachs Financial has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Federated Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Goldman Sachs and Federated Bond

The main advantage of trading using opposite Goldman Sachs and Federated Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs position performs unexpectedly, Federated Bond can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Federated Bond will offset losses from the drop in Federated Bond's long position.

The idea behind Goldman Sachs Financial and Federated Bond Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.